| Abstract: | This research empirically examines determinants of NPLs in DBE and identified the
major bank specific and non-bank specific factors/causes of NPLs in DBE. The data for
the study was collected form primary and secondary sources. Primary data was collected
using both structured and open ended subjective questionnaires from the sample
population of 22 credit units staffs of the Bank, a stratified sampling techniques was used
to select the sample and secondary data was collected from the Bank’s annual reports,
annual loan portfolio, loan recovery and credit operations reports.
Descriptive statistics and regression analysis were used to analyze and examine the data.
Mainly the bank specific, non-bank specific (borrowers related and other external)
factors/causes of NPLs in DBE and major determinants of NPLs in DBE were
considered. The study found out that poor project follow-up, shallow know your
customer (KYC) assessment, low capacity of credit performers, poor loan underwriting,
fund dive-ration by borrowers, poor project management capacity of borrowers and
intervention of external bodies on credit decision making are among the major bank
specific and non-bank specific (borrowers related and other external) factors for
occurrence of NPLs in DBE; moreover, the study find out that loan outstanding and loan
in arrear are considered as variables that positively and significantly determine/affect
NPLs in DBE. But loan collection is the variable among the tested variables that
negatively significantly affects NPLs in DBE.
Generally the study found out major bank specific and non-bank specific factors for
occurrence of NPLs in DBE and determinants of NPLs in the Bank.
The inference and suggestion of the study for the Bank and its credit units, credit policy
reviewers, credit decision makers, credit performers and risk assessors have been
discussed. |
